By the Numbers
Apartment rents soared throughout the pandemic, but relief may be in sight. August marked the first time in almost two years that asking rents fell on average. CoStar Group reports asking rents fell 0.1% from July, marking the first month-over-month decrease since December 2020.
Other data sources point to a similar trend. Rent.com indicates rent for one-bedroom apartments dropped 2.8% in August from July, while Realtor.com posted a moderate decline over the same time period.
Of course, it’s important to note that — on an annual basis — rents remain much higher than this time in 2021. CoStar says asking rents in August were 7.1% higher than the 12-month-ago period.
How We Got Here
Analysts contend COVID-19 lockdowns led to a chain of events. Pent up demand for apartments eventually exploded, pushing rents higher. Then as more people moved out of cities and bought homes, prices rose. That priced would-be homebuyers out and forced them to rent, increasing demand and eventually asking rents as well.
As to why things are finally cooling off, there are several reasons. One is an increase in new apartment construction. Another is weaker consumer sentiment as economic growth slows amid soaring inflation. It’s possible both of those factors are discouraging people from signing onto pricey leases.
Prices could continue to dip over the fall and winter months. People are less likely to move in colder weather, so rents fall due to decreased demand. CoStar has predicted rents will continue to decline in September and largely remain flat through the end of 2022.
Still, for people being stretched to the limit by housing costs, it could be some time until rents drop in a significant way. That’s due to the nature of leases themselves, many of which are at least one to two years long. In this way, it will take some time to unwind the last two year’s increases. In fact, many economists say inflation figures likely won’t reflect falling rents until sometime next year.
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